Week Ahead to July 22. Tesla, Netflix results ahead, what to expect + more
Hi there,
Here is what to expect in Tesla, Netflix's earnings reports. Plus, what will drive markets this week.
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For those tracking and/or investing or trading in the Nasdaq 100 and or the S&P500, which can be traded under; $BetaShares NASDAQ 100 ETF(NDQ.AU$, $Invesco QQQ Trust(QQQ.US$ for example or $SPDR S&P 500 ETF(SPY.US$ $iShares Core S&P 500 ETF(IVV.US$ $Vanguard S&P 500 ETF(VOO.US$ then this section is for you...
The 3 factors that could keep the market on an even keel this week. Or will it be a tug of war?
Company fundamentals will largely drive markets this week. But, will they keep the market on an even keel, or will it be a tug of war?
What we do know is, firstly, despite last week's softer than expected inflation results, the Fed will be in a“blackout period" ahead of its meeting later this month, where they are now likely expected to hike interest rates. The 'blackout' just means that we won't be hearing from any Fed speakers, to say 'boo’ and cause the market to jolt this week.
We also know that the market is expecting earnings season, overall, to show that aggregate S&P500 company earnings declined last quarter, while Tech, Financials and Airlines are widely expected to outperform. We cover what it all means, and what to watch ahead of the Nasdaq 100 balance.
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So it's head down, keep your moomoo bottom up.
1- Firstly, the market will look for direction from company earnings results. Tesla, Netflix, IBM, the big banks and United Airlines are among the 60 of the S&P500 companies reporting quarterly results this week. Good things are expected. As mentioned last week, this earnings season; Tech, Airlines and Financials are expected to report some of the best results. That's according to consensus (market expectations) and based on companies' own issued guidance levels.
A general rule of thumb is that a company's shares in reporting season will generally do well if the company reports a better than expected result and outlook. Further,we typically, see a company's shares outperform the market over the coming months after they reported a better than expected result and outlook. The caveat is that macroeconomic or geopolitical tension can get in the way.
2- Secondly, market moves this week could also be amplified by economic news: US retail sales and US building permits. If better than expected numbers are released, it might add fuel to the fire, and see the Fed keep on hiking interest rates. Traders now anticipate an almost 96% chance the Fed will raise interest rates later this month, after pausing rate hikes in June, according to CME Group’s FedWatch tool. Higher interest rates tend to debilitate earnings margins for high-growth tech companies, that tend to carry higher debt-to-earnings levels.
3- Thirdly, note the impending Nasdaq 100 Special Rebalance that takes place next week. That could have an effect on markets. Meaning, you may expect traders and investors to take profits in some of the largest Nasdaq 100 tech stocks, ahead of the index being brought back into alignment. Read our short note on what to expect and potential implications.
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For those that want to get company specific, this section is for you...
What to expect from Tesla, Netflix, United Airlines, and more banks
Tesla...
- Tesla is the 6th biggest company in the Nasdaq 100, so as we mentioned above, its shares could cop some heat this week amid the Nasdaq 100 rebalance. That said, if Tesla delivers a better than expected result and outlook, its shares will likely kick higher.
- Its shares are up 128% this year, and its price-to-earnings (PE) ratio suggests it's quite expensive.
In fact, it's one of the most expensive stocks in the Nasdaq 100, in comparison to its earnings. We will be looking at its deliveries (sales), margins and outlook when they are released July 19
- Expect record deliveries and record revenue. But margins to remain in the red. Given Tesla has already reported delivery numbers for Q2, showing deliveries grew 83% year on year to 466,140 units, you can probably expect the EV giant to report record deliveries, and revenue.
- Growth rates for Tesla's deliveries have been underpinned by Tesla's aggressive cost cutting, coupled with the expansion of its manufacturing capacity. But the growth for Q2 that Tesla's reported, was also driven in part by the comparison with Q2 2022, as that's when the company's Chinese business declined sharply amid Covid-19 lockdowns.For perspective, Model Y sells at more than 20% below last year's prices. And the Model 3 and Y are also eligible for the $7,500 tax credit under the Inflation Reduction Act in the US.
- All in all,Tesla's average selling prices are likely to trend lower and this will likely impact margins over Q2. Keep in mind, Tesla’s Automotive gross margins over Q1 2023 were at 19.3%. That’s about 10% lower than the quarter a year-ago. And as we are illustrating, you may expect a similar YoY margin decline in Q2.
Netflix...
- Firstly, subscribers are expected to have jumped.Have you noticed Netflix's new plans rolled out in Australia? You can use Netflix for $7 per month, down from $17 per month. That's Australian dollar. The new offering was previously rolled out in the US and thus its results will likely reflect an increase in paid subscriptions, and it could thus report a better than expected result.
- Also note UBS recently increased its price target for the streaming giant's shares. UBS sees Netflix shares rising 20% in a year.
The Financial sector...
- Results are out this week from $Bank of America(BAC.US$, $Morgan Stanley(MS.US$ and $Goldman Sachs(GS.US$. If last week's reports from $Jpmorgan Chase & Co(JPM-C.US)$, and $Citigroup(C.US$ are anything to go by, this week's trio may deliver lukewarm numbers.
- So far, banks have reported better than expected quarterly results, and also note, $JPMorgan(JPM.US$' shares keep outperforming the $Spdr S&P Bank Etf(KBE.US$. One reason for that is JPMorgan's earnings per share improved after taking over First Republic, while the giant's revenue rose from loan growth, which boosted its net interest income. Interestingly, JP's loans grew by 13%, but deposits fell 6%. The drop in deposits at JP's reflects that the public believe there is better opportunities for capital growth, instead of leaving their cash at the bank.That makes sense right, given inflation is so high?
- Meanwhile, $Citigroup(C.US$ market revenue and investment banking business results were lacklustre. But it was able to return $2 billion to shareholders through dividends and share buybacks, thanks to Citi growing its loan book.
Airlines...
- $United Airlines(UAL.US$, results on watch this week, after rival $Delta Air Lines(DAL.US$ reported record results last week .
- Delta reported its highest ever quarterly revenue and earnings report last week, which also beat market expectations. Delta upgraded its full-year outlook amid booming international travel. So could you expect the same from United Airlines?
To read more on the above, click here. Click here to check out moomoo's economic calendar which includes market forecasts.
Explore more with moomoo, and invest in your financial future today.
Happy Investing.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Moomoo Official Market Strategist
Investment strategist, featured on TV, radio, newspapers.
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Phoebeeeee : Love what you write about Jessica, hope to see you speaking soon!
StarrySoda : insightful